Naira Ranks as Best Performing Currency as It Continues to Appreciate - Goldman Sachs

It was reported on Sunday that the country's local currency (naira) increased against the US dollar, breaking through key resistance levels to trade below N1,000 in certain black market segments.

This performance corresponds with increased geopolitical tensions worldwide and aligns with Goldman Sachs's previous projections.

"The Naira's current bullish momentum is projected to persist, potentially pushing the exchange rate below N1000 per US dollar in the upcoming months," economists from the American investment bank Goldman Sachs commented.

According to Goldman Sachs Group, the Naira was the best-performing currency in the world in April. The local currency was predicted to continue rising in value as long as the Central Bank of Nigeria (CBN) continued to implement sound policy management.

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The naira's value has been rising after experiencing significant devaluations since June last year, which led to high inflation and hardship for her citizens. However, the financial authorities in Nigeria have not been quiet, as they have placed numerous strongholds to stabilise the economy. These include repeatedly raising interest rates to 24.75% and making calculated foreign exchange interventions.

"The Central Bank of Nigeria's (CBN) aggressive monetary policy adjustments and the implementation of new market strategies have been central to the recovery of the naira from its prior losses," a CBN spokesperson stated during the latest Monetary Policy Committee (MPC) meeting.

Additionally, changes in the geopolitical landscape have affected market movements. Iran's recent attack on Israel prompted people to flee, strengthening the US dollar's value relative to other currencies.

After initial gains, the dollar stabilised, partially relieving market fears when Israeli ministers indicated no immediate plans for retaliation.

In March of last year, Goldman Sachs updated its forecast and said that by 2024, the naira would appreciate N1200 per dollar. The firm attributed the positive outlook to several policy initiatives and increased capital inflows to stabilise the foreign exchange market.

Finance Minister Wale Edun disclosed plans to sell foreign currency bonds in the second quarter and plans for increased US dollar inflows. This action is part of larger initiatives to use high-yield, short-term debt instruments to attract foreign investment.

Nigeria's gross foreign reserves have decreased even as global commodity prices, especially crude oil prices, have continued to rise. This is despite the naira's recent rally and measures to increase economic inflows. Nigeria's oil grades are trading at a premium over the ICE Brent benchmark, which could offset the negative fiscal impacts of reduced production volumes.

An industry analyst explained, "The ongoing geopolitical unrest in the Middle East and the anticipation of further instability have had significant ripple effects on global markets, influencing commodity prices and currency valuations alike."

Back Story
On April 4th, we revealed that the naira has continued to strengthen against the US dollar as it re-recorded a positive move on Wednesday, much to the delight of Nigerians, both at the official foreign exchange market and on black markets.

According to data from the FMDQ Securities Exchange, the dollar traded for N1,262.85/$ on Wednesday at the Nigerian Autonomous Foreign Exchange Market, which signifies an increase of N16 or 1.26%, from how it closed on Tuesday at N1,278.58/$.

The naira has continued to rise against the US dollar, hitting 1,262/$, indicating that the local currency is expected to continue appreciating. The positive impact has been attributed to the consistent supply of dollars, which has also contributed to this.